Typical debit cards utilize real-time online network systems which link a card user's debit card to a prepaid account, such as a checking account. Payment terminals are wired through a network connection to a server. All card user funds are on-account and stored in the server. When a transaction occurs, the payment terminal sends the card data (i.e., account number and personal identification number) to the server for validation. The server validates the account and checks the account balance for adequate funds to pay for the transaction. If funds are available, the transaction is approved. If funds are not available the transaction is denied. The total transaction time can range from 5 to 30 seconds. In these installations, all terminals are typically hard-wired to the network, requiring an extensive and complex network which must be expanded or modified with each new terminal addition or terminal relocation. Should the network fail, the payment terminals connected thereto are rendered inoperable. In addition, all data (including personal identity information) on the network is vulnerable to intrusion by unauthorized personnel. Furthermore, debit cards typically include data stored upon a magnetic stripe, which can be easily scanned by unauthorized personnel, allowing the account number to be copied and the card duplicated. Consequently, the card holder's account may be accessed by a thief and depleted before they are even aware of the breach.
One solution to the aforementioned problems is portable electronic devices capable of storing cash value electronically. The portable electronic device is used in place of hard currency (i.e., cash or coins) to perform financial transactions such as purchasing goods and services. A typical portable electronic device used for purchasing goods and services is a stand-alone card (commonly referred to as a “smart card”) having embedded electronic circuitry to store and process electronic cash value information for performing financial transactions. Because hard currency is represented in electronic form and transactions are performed electronically, the smart card allows a user to carry less hard currency and reduce the need for exact change.
For example, to purchase goods or services at a business such as a gasoline station or supermarket a user may insert a contact-type of smart card into a card reader, whereupon the card reader makes contact with the smart card. After making contact with the card reader the smart card exchanges electronic cash value information with the card reader to perform the transaction. Alternatively, a user may place a contact-less type of smart card proximate a smart card reader, whereupon the smart card exchanges electronic cash value information with the smart card reader by means of radio frequency (RF) signals to perform the transaction. If the appropriate electronic cash value information is exchanged, the smart card reader and the smart card perform the transaction for the purchase of goods or services.
However, if a smart card lacking security features is lost, an unauthorized user may easily access the funds stored thereon. A typical security feature for a smart card is the use of a password or personal identification number (“PIN”) in conjunction with a transaction. When conducting a transaction a user inputs a password or PIN that must be authenticated in order for the user to complete the transaction. One disadvantage of a password or PIN security feature is that the password or PIN may be easily copied or retrieved by an unauthorized user. Another disadvantage of using the password or PIN security feature is that, even if the correct password or PIN is provided in the course of a transaction, there is no assurance that it is the authorized user who is actually using the smart card.
A more sophisticated security feature for a smart card is the use of biometrics such as verbal verification, dynamic handwritten signature recognition, fingerprints, hand geometry and retinal scans to verify that an authorized user is using the smart card. Although such biometrics ensures that only an authorized user is using the smart card, such features require sophisticated hardware and extensive computing power, which increases a business' overhead cost to implement and maintain. From the consumer's perspective another disadvantage of using biometrics is that it increases the complexity of using the smart card to perform a transaction.
Another shortcoming associated with a smart card is recovering information stored in the smart card when it becomes lost, damaged, or destroyed. For example, the password or PIN security feature and the biometrics security features do not address the problem of recovering electronic cash value information stored in the smart card in the event that the smart card is lost, damaged, or destroyed. Without a way to recover electronic cash value information in a smart card a user thereof will be wary of relying upon the smart card to any significant extent. There is a need for a system that addresses the aforementioned drawbacks.